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Financial Markets…The European stock index (the Stoxx 600) rose 0.6% to its highest level in 19 months following higher-than-expected German business confidence. The euro advanced to an 8-month high against the US dollar in early trading, appreciating to $1.3927. The 17-nation currency also strengthened to the highest level versus the yen since August 2011.

Standard & Poor’s upgraded its sovereign credit rating for Greece to ‘B-‘ from ‘Selective Default (SD)’ with a stable outlook. The rating agency cited Euro-zone countries’ strong determination to support Greece’s membership in the currency block and the Greek government’s commitment to fiscal and structural reform for the upgrade. The country’s rating was cut to ‘SD’ from ‘CCC’ on Dec.5 in the wake of a debt buyback.

Developing-country equities climbed, with the benchmark MSCI Emerging Markets Index rising 0.6% to the highest level since April 3, as an encouraging German business confidence report, optimism on a U.S. budget deal, and anticipation of further economic stimulus from Japan boosted investor sentiment.

High-income Economies…US new privately owned housing construction started (“housing starts”) fell 3% (m/m) to a 861,000 annual rate from 888,000 annual pace in October. Despite the monthly decline, the average rate of housing starts from September through November was the strongest since the three months ended August 2008, and in the year to date is up 27.1% from the first 11 months of 2011. Building permits, a proxy for future construction, advanced to a four-year high.

German business confidence rose for the second month in a row in December, with the Ifo institute’s business climate index climbing to 102.4 from 101.4 in November. Business confidence has continued to rise after dropping to a 2½ year low in October. Ifo’s sub-index of the current situation, however, slipped to 107.1 from 108.1, while a sub-index of executives’ expectations rose to 97.9, the highest since May, from 95.2 in November.

The Euro Area current account surplus rose to 3.9 billion euros in October from 2.4 billion euros in September, mainly reflecting a larger goods trade surplus, as imports declined at a faster pace than exports due to weak demand in the Eurozone.

Spanish industrial orders rose sharply by 6.6% (m/m) in October compared with September. On a year-on-year basis, industrial orders rose 5.5% (y/y) following a fall of 6.2% in September.

The Czech central bank kept its policy interest rate unchanged at 0.05% and said it would keep rates at this level over a longer horizon until inflation pressures increase significantly.

Polish industrial output fell 0.8% (y/y) in November after a 4.6% (y/y) increase in October.

Developing Economies…India's central bank kept its key interest repo rate unchanged at 8% and cash reserve ratio at 4.25% as sticky inflation did not allow easing policy in support of domestic demand. Malaysia's 1.3% (y/y) consumer price inflation rate in November was unchanged from the pace recorded in October, as growth in prices of food and non-alcoholic beverages and selected services, including health care service, offset moderation of prices of durable goods, apparel and footwear and communication services.

Mexico’s retail sales fell by 1.0% (m/m) in October compared with September. On an annual basis, sales rose by 3.5% (y/y) in October slowing down from a 3.8% growth pace achieved in September.

Nigeria’s inflation rate rose to 12.3% (y/y) in November compared with 11.7% recorded in October, building on increased prices of food and core indices reflecting the impact of recent floods.

The Philippine balance of payment registered a surplus of $8.5 billion in the first 11 months. A $2.16 billion BOP surplus in November alone was 3.5 times higher than the surplus registered in October on accelerated capital inflows, including remittances. Russia’s retail-sales growth accelerated in November with consumer spending stimulated by growing wages and incomes. On the annual basis, sales rose 4.4% (y/y) faster than a 4% growth recorded in October. Real average wages increased 7.3% (y/y) in November; the fastest pace in four months and disposable incomes advanced 6.7%.

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